Answers to your insurance questions

What will you get paid in a claim? First you start with the amounts you are showing on the insurance policy in question. This is the total amount that could be paid. The idea behind claims settlement is that you should get back to where you were just before the claim occurred. Insurance should not give you a gain, it should be equal - no more and no less.

Part of the basis of claim will be if there is co-insurance. Co-insurance is a percentage that you must insure up to or suffer a penalty. If it is a building that is requiring replacement or repair then other sections of the policy might be involved. These could include additional living expense for a homeowner or business interruption for a retail store.

The insurance company may give you an initial lump sum to start the purchase of lost or damaged items or you may have to use your own money and get reimbursed. If you choose to take a cash settlement then there can be an adjustment of 20% or more deducted. This often can be recovered once you produce receipts for the items that have been replaced.

What will that actual amount be that you are paid in a claim? The amount can be determined by Actual Cash Value (ACV) or Replacement Cost (RC). The deductible will be taken from the final amount determined to give you a net payout. Be aware that you only get full replacement cost if you actually replace the item.

The definition of Actual Cash Value is the cost to replace an item of property at the time of loss. This value is less an allowance for depreciation. An example is you bought a table five years ago and paid $1500 for it. This same table will cost $2000 to replace it today. With depreciation of 10% per year for three years on the Replacement Cost then the Actual Cash Value payout would be $1180.98.

The amount of deductible and limit can affect the payout. If an item is one of a pair this can affect the amount paid. An insurance company can declare that the 1/2 that you still have is worth something so will only pay a partial claim.

Certain items such as jewelery can have set guaranteed value. If you have scheduled items for an agreed upon amount of repayment then that is what the insurer will spend on the replacement item. Often the deductible is minimal or waived when you have placed this special form of insurance.